COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1133

Exchange and Optimality

S. Ghosal and H. M. Polemarchakis

September 1996

A feasible social state is irreducible if and only if, for any non-trivial partition of individuals with two groups, there exists another feasible social state at which every individual in the first group is equally well-off and someone strictly better-off.

Competitive equilibria decentralize irreducible Pareto optimal social states.